Gold falls on China demand concerns

GOLD prices have fallen to the lowest level in 10 weeks, as investors ignore tensions in Ukraine to focus on an improving US economy and falling Chinese demand for the precious metal.

Gold for June delivery, the most actively traded contract, on Tuesday fell $US7.40, or 0.6 per cent, to $US1,281.10 a troy ounce, the lowest settlement since February 10, on the Comex division of the New York Mercantile Exchange.

Prices had been buoyed for much of April by investors seeking a haven from the upheaval in Eastern Europe, where Russia is encroaching on Ukraine. US Vice President Joe Biden on Tuesday warned Russia it would face additional economic sanctions if it doesn't withdraw its forces from Ukraine's border, news that some analysts had thought would spur more gold purchases.

But instead, gold ended lower for a third straight session, putting prices at the level they were before the Ukrainian crisis ignited.

"Gold needs guns firing and threats of escalation, not a long, drawn-out conflict," said Frank Lesh, a broker at FuturePath Trading.

"Most people just see better opportunities elsewhere."

Gold demand in China, the world's largest consumer of the precious metal, will likely stagnate this year, the World Gold Council said last week. Some investors worry that as China's economy slows, so will its demand for precious metals, leading to pressure on gold prices.

Investors have also grown more convinced that the Federal Reserve will wind down its monthly bond-buying program before the end of the year on the back of a sustained US recovery. The stimulus program, which stood at $US85 billion a month at its peak, boosted the US economy but weighed on the US dollar, making gold seem like an attractive alternative to some investors.

"Gold has lately been so volatile and difficult to trade that buying gold in itself is starting to be viewed as risky," said Bill O'Neill, a principal at Logic Advisors.

In other precious-metals markets, silver for May delivery settled up 0.1 per cent to $US19.361 an ounce. Palladium for June delivery was 0.8 per cent higher at $US783.65 an ounce. July platinum fell 40 US cents to $US1,400.30 an ounce, the lowest settlement since March 27.